If sitting in exit rows with middle seats blocked, upgrading often, and getting a free ticket to see my family from the miles for two trips I was going to make anyway is what it means to be a victim of a pyramid scheme, I'll be seeking out some more.

A key point is that the gazillions of miles sold through non-airline channels have very little impact on elite status levels - I'd guess the vast majority of mileage runs discussed on this board are just as much about status as redeemable miles. It's true that dilution of miles reduces their value, but that fact is nearly universally recognized and I think most people factor it into their decisions about mileage earning activities.